United Technologies Boosts Outlook, Buoyed by New ProductsBy
Aftermarket sales increase for Pratt & Whitney jet engines
Third-quarter profit tops analyst estimates; forecast raised
United Technologies Corp. raised its 2017 profit forecast for the second consecutive quarter, buoying the industrial manufacturer as it plans a major expansion in aerospace with the acquisition of Rockwell Collins Inc.
The maker of elevators and aircraft landing gear is recording the strongest organic growth since 2011 as it benefits from the development of new products, particularly in its climate-control and Pratt & Whitney businesses, said Chief Financial Officer Akhil Johri.
“The investments we have been making in innovation these last few years are starting to show up in our numbers,” Johri said Tuesday. The climate unit has introduced more than 200 new items in recent years, he said in a telephone interview after United Technologies posted third-quarter results above analysts’ estimates.
The improved outlook comes at a pivotal moment for United Technologies, which is boosting output of a critical new jet engine to support rising production of aircraft. The Farmington, Connecticut-based company is looking to move past recent issues such as delivery shortfalls and currency headwinds.
While United Technologies was little changed at 10:49 a.m. in New York, the steady results helped push its customers to gains. Airbus SE, which uses Pratt & Whitney engines on its fast-selling A320neo, rose 2.9 percent, while Boeing Co. advanced 0.7 percent.
United Technologies reached the blockbuster deal to buy Rockwell Collins last month in one of the biggest tie-ups in aerospace history. The combined company will offer a broad suite of products, from Rockwell’s cockpit displays to United Technologies’ Pratt & Whitney engines.
The acquisition, projected to close next year, would better position United Technologies to withstand the squeeze from Boeing and Airbus for pricing discounts and higher output.
United Technologies is “well on our way” to hit the target of delivering 350 to 400 of Pratt’s new geared turbofan jet engines this year, Chief Executive Officer Gregory Hayes said on a conference call with analysts. Pratt delivered 254 GTF units through the first three quarters.
Adjusted earnings this year will be $6.58 to $6.63 a share, up from a previous range of $6.45 to $6.60 a share, United Technologies said in a statement. The new outlook tops the $6.57 average of analysts’ estimates compiled by Bloomberg. Sales will be $59 billion to $59.5 billion, an increase of $500 million on the low end, the company said.
Adjusted earnings fell to $1.73 in the third quarter, exceeding the $1.69 average of analysts’ estimates. Sales climbed 4.9 percent to $15.1 billion.
Revenue rose 11 percent in the Pratt & Whitney unit, which is increasing production rates for the GTF. The product, designed to compete with a General Electric Co. model on narrow-body planes, has faced a series of glitches, including durability problems and production delays. Pratt is rolling out fixes this year.
Pratt recorded a charge of $196 million during the quarter related to GTF delivery contracts. The move was intended to end “the debate that was swirling around in terms of any penalties” the company would have to pay customers related to delays, Johri said.
Commercial aftermarket sales jumped 11 percent in the aerospace and Pratt divisions.
The Otis elevator business, which is facing persistent sluggishness in the Chinese construction market, increased sales 4.6 percent. Earlier this month, United Technologies named Judy Marks president of Otis.